The different types of international organizational structure generally fall into five categories. Multinational companies may be organized into divisions, or by geographical location of operations. Manufacturers operating globally often use an international organization structure focused around product lines. Other global organizations choose to pursue a functional structure. An internal collaborative approach may also be used, and this is often referred to as matrix structuring.
International organizational structure is sometimes based on divisional structuring. Companies may choose this option because expansion is relatively simple. A new division is created, and nested within the existing management structure. This is comparable to adding a room onto an existing building, as the other aspects of the operation are left mostly unaffected.
Structuring by geographical area is another form of a compartmentalized international organizational structure. In this case, management usually appoints regional directors, with each one having responsibility over operational decisions within a geographical area. This strategy is often employed when a business first makes the leap from domestic to international operations. Another advantage often cited is that indigenous leadership can be put in place within a geographical area, thus tapping the cultural acumen of the manager.
Organizing operations around product lines may be another choice for manufacturing firms that possess facilities in multiple international locations. Just as in the case of a geographical corporate management structure, this form allows for easier expansion. Automotive companies are one example of an industry that often uses this form of international organizational structure. One automotive line making cars that appeal to North Americans may be located in the U.S., and geared toward that market, while another product line may consist of subcompacts targeted to a European market. Even though such operations are under one company, managers of a product line may operate in a highly autonomous fashion, allowing rapid response to changing market conditions.
Sorting operations by functionality is yet another type of international organizational structure, and one that is very common. It is also known as departmental organization. In this case, an international company or organization may have a marketing department, an accounting department, and so on. Sometimes, if this is used on a large scale and spans multiple countries, bureaucratic behaviors may eventually impede productivity.
An international organization using a matrix structure usually aims to combine the strengths of both product and functional structures. This system is more supportive of cross functionality, and offers large international organizations a more collaborative approach. In a matrix structure, management tries to discourage silos, while still retaining a departmental structure. This form of organizational structure is often used to stem the growth of internal bureaucracy, while still allowing departmentalization.